1. A project costs $450 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

a. 5.00 years

b. 5.67 years

c. 6.00 years

d. The project never pays back

e. 5.33 years

2. Which of the following is/are correct regarding agency costs?

I. Indirect costs occur when managers, acting to minimize the risk of the firm, forego investments shareholders would prefer they take.

II. Direct costs occur when shareholders must incur costs to monitor the manager's actions.

III. Direct costs occur when managers buy assets considered unnecessary by the firm's owners.

a. I only

b. II and III only

c. I, II, and III

d. II only

e. I and II only